Are we in a Recession right now?

The answer to this question isn’t so easy. Let’s start by explaining what a recession even is. A recession is typically declared by experts when a nation’s economy experiences two consecutive quarters of negative gross domestic product (GDP). GDP turned negative in the first half of 2022, but rebounded back to positive growth in the third quarter.

GDP Q1 2022 being -1.6% GDP Q2 2022 being -0.6% GDP Q3 2022 being 3.2% By definition we actually just got out of a recession in Q3. So, are we in a recession right now? The simple answer, by definition, is no we are not in a recession. The more complex answer begs the question; Can you still be in a recession even if it doesn’t exactly fit the definition? We think so.

Let’s start with some alarming numbers from the world’s largest firms

Since October we’ve seen

Amazon lay off 10,000 employees Apple freeze hiring Twitter lay off 75% of employees Goldman Sachs lay off 8% of employees Coinbase lay off 18% of employees Intel lay off 20% of employees Meta lay off 13% of employees In total, 150,000+ employees laid off in tech in 2022 If that doesn’t scream be cautious then I don’t know what will.

Credit to MorningTendies.com

We’ve heard Coinbase CEO Brian Armstrong, as well as Jeff Bezos, Elon Musk, and Mark Zuckerberg all say the United States is heading into a recession. These preemptive layoffs feel like the world’s largest companies are preparing for this recession.

What about the Stock Market?

We’ve seen MASSIVE selloffs this year in the financial markets. Let’s take a look at some of the crazier ones.

YTD performance (at the time of writing this article)

S&P 500 is down -19.16% Dow is down -8.87% Nasdaq is down -32.33% Bitcoin is down -64.77% Apple is down -25.72% Tesla is down -65.59% Nvidia is down -45.33% Amazon is down -49.15% Roblox is down -71.59% Meta is down -64.62% Netflix is down -50.12% We can keep going on and on, but I think you get the point. Stocks have sold off hard. This could be for any number of reasons, but here is some we believe could be the case for this selloff.

Stocks are returning to pre-pandemic, fair valuations Investors are transitioning to cash positions as the market environment is shaky Investors are concerned that the Feds rate hiking campaign will push the economy into a recession What about Recent Economic Data?

Well, it’s mixed.

We’ve seen some good and some bad data recently. Let’s start with the good.

The Good

The CPI report. The CPI report shows inflation rose just 0.1% from the previous month and increased 7.1% from a year ago, below the respective estimates of 0.3% and 7.3%. This shows signs that the Fed is finally starting to get control of the inflation problem. The Consumer Confidence Index. The Conference Board’s Consumer Confidence index came n at 108.3 for December. An increase from the prior month of 101.4. This shows Americans are growing more optimistic about the economy and jobs. Price of Oil. The price of oil is about $78.44 per barrel. We’ve seen a steady decline in crude oil price since its peak back in June. Whether Americans want to admit it or not, oil is the blood of our economy. Lowering oil prices is essential for everything. The $78.44 number is still elevated compared to historical costs, but it’s far better than the nearly $120 per barrel back in June. The Bad

Rate Hikes. The Fed is raising rates aggressively in order to fight inflation. The latest Fed decision, on 12/14, raised interest rates by 50 basis points. Interest rates are now higher than in 2008. The Federal Reserve also said ongoing rate increases are “likely appropriate”, and that they see rate increases continuing through 2023. These rate hikes are good in the long term as it will help fight inflation, but in the short term there are concerns it could crash the economy into a recession.
Housing Market. The housing market has been on a steady decline from previous record highs and shows no signs of slowing down. Existing-Home Sales fell more than 7% in November, marking the 10th straight month of decline. Sales are down 35.4% YoY and the mortgage demand has hit its lowest since 1997. So are we in a recession right now?

The question is more complex than a yes or no answer. By definition, no. By the data and current events we just talked about, maybe. It is definitely a time when one should practice being patient and composed.